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Consider a bond (with par value = $1,000) paying a coupon rate of 10% per year semiannually when the market interest rate is only 4% per half-year. The bond has 3 years until maturity. a. Find the bond's price today and 6 months from now after the next coupon is paid. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)
Current price ............................$
Price after six months........................................ $
b. What is the total (6-month) rate of return on the bond? (Omit the "%" sign in your response.)
Rate of return ........................%
On May 8, 2013, an investor owns 100 Google shares. The share price is about $ 871 and a December put option with a strike price of $ 820 costs $ 37.50.The first involves buying one December put option contract with a strike price of $ 820. The secon..
John is reviewing investment performance of the family portfolio over the past 2 years and the returns were -0.5% and 4.5%, respectively. What is the mean return of Mason's portfolio? What is the geometric mean of Mason's portfolio? What is the expec..
Tattered Books has a WACC of 13.6 percent and a cost of equity of 16.1 percent. What is the after-tax cost of debt if the debt-equity ratio is 0.40? (Hint: First find the weights of debt and equity using the debt-equity ratio and then plug them into ..
Studies have shown that indexed funds can produce higher returns than managed funds; this is evidence in support of:
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Think about corporate governance and its impact on financial decision making. We've seen how important certain factors and estimates, such as the cost of capital, forecasts of interest rate changes, etc., can be to the reliability of project valuatio..
Junior Interiors market value capital structure of 62% Common Equity, 3% Preferred Stock (PS) and 35% Debt. The company does not pay dividends, and evaluates its operations as approximately 30% more risky than an “average” company in the industry. Wh..
The book value of equity of a firm is $82 million and the market value of equity is $96 million. The face value of debt of the firm is $40 million and the market value of debt is $16 million. What is the market value of assets of the firm?
You need $3,000 to buy a new stereo for your car. If you have $1,200 to invest at 6% compounded annually, how long will you have to wait to buy the stereo? A stock will pay a dividend of $2 at the end of the year. It sells today for $100 and its divi..
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Suppose that the recovery rate is 30% and the default probabilities each year conditional on no earlier default is 3%. Estimate the credit default swap spread. Assume payments are made annually.
Suppose that B2B, Inc., has a capital structure of 36 percent equity, 16 percent preferred stock, and 48 percent debt. Assume the before-tax component costs of equity, preferred stock, and debt are 13.5 percent, 9.0 percent, and 8.5 percent, respecti..
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